Donald Trump's security policy document presents a misguided view of the European Union. The document asserts that open-border policies and so-called "progressive" agendas represent an grave risk to European civilization. Yet, this argument rests on a fundamental misreading of the reality. The actual danger confronting the EU is not societal but economic and technological backwardness.
The Stark Growth Gap Separating Europe and the US
The data paint a sobering contrast. Between 2008 and 2023, American economic output surged by eighty-seven percent, while a paltry 13.5% growth for the European Union. Over this time, European income per person fell from over three-quarters to just 50% of the American figure. Strikingly, even the poorest US state now has a higher per capita income than major European economies like France and Italy.
Today, roughly 50% of the world’s 50 largest technology firms are US-based, while only four are European.
The Innovation Deficit: The Core Problem
The growing economic gap stems from stronger productivity growth in the US, fueled by breakthroughs and higher total factor productivity. The scene of global tech dominance is decidedly American. In the last five decades, hundreds of American startups have grown into companies valued at more than $10bn, versus only fourteen in the European continent.
This disparity raises a vital question: In the race for tomorrow's sectors like AI, semiconductors, and quantum computing, where does Europe stand? Experts widely concede it is essentially a two-horse race between the United States and China, with Europe entering at a significant handicap.
Root Causes of Europe's Technological Lag
Several key reasons explain this technological divide.
- Financing Ecosystem: The United States has a much more robust and more dynamic system for financing new ventures. The EU has yet to establish a genuine capital markets union, a factor that limits the growth potential of emerging companies.
- Bureaucratic Hurdles: Complex and divided rules hinder Europe. A US startup can launch a service under a single set of laws to access a market of hundreds of millions. The European Union, despite a larger population, is divided among 27 different national regimes, creating significant internal barriers.
- Mindset Differences: Views on risk-taking differ sharply. In parts of Europe, business failure was historically viewed with stigma, whereas in the United States, it is often seen as a badge of experience.
- Defense Spending: The United States enjoys a deeply integrated innovation pipeline linking defense and academia. The continent's long-term lack of spending in military capabilities has eroded its ability in pioneering research.
A Path Forward: Reasons for Hopefulness
In spite of these hurdles, there are reasons for hope. European leaders are increasingly aware of the existential challenge and have started to advance substantial change. Notable reports on European competitiveness and the single market point to the necessity of sweeping reforms.
Given appropriate policies and rule changes, these assets might enable much higher degrees of business-led breakthroughs.
Europe still possesses significant strengths: high-quality human capital, excellent education systems, and premier research institutions. Coupled with a vast domestic consumer base and substantial household savings, these foundations have the potential to trigger a surge of investment and entrepreneurship.
Crucially, even if the EU does not take the lead in developing cutting-edge technologies, it can still dramatically increase productivity by adopting and adapting advancements from elsewhere.
A Critical Juncture
The European Union now stands at a critical crossroads. As the saying goes, decline often happens "slowly, then all at once". So far, the continent's slide in innovation has been gradual. But, without bold steps to address its structural weaknesses, today's slow erosion could give way to a sudden and irreversible loss of global economic relevance.
